This site uses cookies to store information on your computer. Some are essential to make our site work; others help us improve the user experience. By using the site, you consent to the placement of these cookies. Read our privacy policy to learn more.

Five key issues FASB may change in financial reporting

FASB is preparing to consider foundational changes that could
significantly alter financial reporting in the future as well as
standards improvements that will reduce complexity, board Chairman
Russell Golden said Thursday.

Here are five issues that will be studied and debated by FASB in the
coming years under active projects, as described by Golden in a speech
at the 13th annual Financial Reporting Conference in New York City:

Measurement. FASB will debate an overarching
measurement philosophy as part of its conceptual framework project
because, Golden said, a conceptual philosophy of measurement does not
exist in current standards. “That will be very difficult,” Golden
said. “That will be very challenging. And you will see passionate
views on various sides of the aisle. But it’s something that I hope we
can achieve and create a foundation for future boards.”

Presentation. This discussion also will be part of
the conceptual framework project, and Golden said the board needs to
consider whether there needs to be improvement in the performance
statement and, particularly, the income statement. “Would it be better
to classify the income statement between recurring and nonrecurring
activities?” Golden said. “Or between operating activities and
nonoperating? Or between some form of operating and recurring?”
Disaggregation may give investors a better understanding of the
difference between recurring and nonrecurring items and may reduce the
desire for disclosure of some non-GAAP measures, Golden said. He said
some improvements to the statement of cash flows also could be made to
conform with changes to the performance statement.

Disclosures. Under current requirements, there may be
too many disclosures related to fair value and pensions, and too few
disclosures related to income taxes, Golden said. Under FASB’s
disclosure framework project, the board’s staff is conducting
field-testing to determine whether disclosures can be structured to be
more effective in relation to those three topics and others.

Liabilities and equity. A high number of restatements
are related to liabilities and equity, Golden said. “I think the
reason is, it is not intuitive,” Golden said. “You have slightly
different economics that can have substantial changes in the
measurement.”

Hedge accounting. FASB will consider whether
standards can be changed so disclosures will more appropriately
portray when management is hedging as an attempt to manage risk,
Golden said. The International Accounting Standards Board recently
released a discussion paper seeking feedback on a possible new
approach to financial reporting of hedging. Golden said better
disclosures could inform financial statement users when management is
entering into a risk mitigation strategy, what risks are being
mitigated through hedging, and what new risks the hedging might bring.
“Has risk been mitigated, or changed to something else?” Golden said.

What do accounting firms waiting on others to develop AI, automation, and data analytics tools have in common with a baseball fan sitting in a stadium filling with water at an exponential rate? The answer could determine your firm’s fate.